Sarkozy's party under fire for alleged kickbacks in Pakistani sub deal

The party of French President Nicolas Sarkozy is under fire for a 1995 campaign for former PM Edouard Balladur (photo) that is suspected of links to a cancelled Pakistani defence deal and a bomb attack that killed 11 French engineers in Karachi.

It’s a complicated plot involving the killing of 14 people — including 11 French engineers — in a volatile Pakistani city, a plot that involves defence sales, kickbacks and intermediaries channelling millions of dollars worth of cash into a bank account.

More importantly though, it’s the hint of political intrigue extending all the way up to a former French prime minister and the current president, Nicolas Sarkozy, that has gripped French readers this week.

“La piste Balladur”, or the “Balladur track”, as it’s being called in France, refers to allegations that a May 2002 attack in the Pakistani city of Karachi that killed 11 French engineers is linked to the 1995 presidential election campaign of former French Prime Minister Edouard Balladur.

The director of Balladur’s 1995 presidential campaign bid was Sarkozy.

Balladur lost his presidential bid to his rival, Jacques Chirac, who then scrapped a number of defence commissions to Pakistani military officers.

Retaliation for scrapped commissions

French media reports have suggested that the attack on the French engineers in the southern Pakistani port city of Karachi was in retaliation for the scrapped defence commissions.

The 11 French engineers were employees of the state-owned shipbuilder Direction des Constructions Navales, which supplied the Pakistani military three Agosta submarines.

On Monday, a French left-leaning daily, Liberation, published a report claiming that it had unearthed documents proving that cash deposits worth 10 million francs (around $2 million at the time) were deposited in Balladur’s campaign bank account.

According to Liberation, Balladur used two Lebanese-born businessmen as intermediaries in the deal. The newspaper alleges that under the terms of the deal, Pakistani officials would receive 338 million francs as a commission, while another 216 million would be added to the price of the contract and returned to Balladur’s campaign account as kickbacks.

Lawyers acting for the bereaved families of the French engineers have seized upon the latest reports to renew their allegations that magistrates are soft-pedalling an investigation that might lead them to Sarkozy.

A ‘grotesque fairy tale’

Both Balladur and Sarkozy have strongly denied the latest allegations. In an article in the French daily Le Figaro, Balladur he wrote that "in this presentation of things nothing corresponds to the truth, nothing is backed up with facts".

Sarkozy has previously described alleged links between the May 2002 attack and the 1995 kickback scandal as a "grotesque fairy tale".

Responding to the latest allegations, a spokesman for Sarkozy's ruling UMP party, Frederic Lefevbre, dismissed the allegations as "rumours". He also denied Liberation reports that key documents from an official French investigation have not been released.

"Let the legal system do its work," Lefevbre told reporters Monday.

An uphill challenge

Analysts, however, say it will be very hard to determine who was responsible for the killing of the 11 French nationals in Pakistan.

Shortly after the attack, an al Qaeda-linked group was held responsible for the suicide car bombing outside the Karachi hotel where the French team was living. No group took responsibility for the attack however and analysts note that myriad militant groups with often shifting allegiances operate in Karachi.

Analysts say the latest allegations that the killings are linked to Pakistani military officials irked by the French scrapping of defence commissions, if true, will be even harder to prove.

Pakistan has a vast security and military establishment dominated by the shadowy Inter-Services Intelligence agency, which is often described as a state within a state. Investigations into alleged ISI links to militant groups are notoriously difficult, analysts say.

Time may also not be on the investigators’ side. Since the 2002 attack in Karachi, the ISI has had four different chiefs. Many who were senior ISI officials in 2002 have retired or have been transferred to other posts.